Question
Rooney Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable
Rooney Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here.
Cost of materials (13,400 Units $17) | $ | 227,800 | |
Labor (13,400 Units $12) | 160,800 | ||
Depreciation on manufacturing equipment* | 37,000 | ||
Salary of supervisor of engine production | 68,000 | ||
Rental cost of equipment used to make engines | 19,000 | ||
Allocated portion of corporate-level facility-sustaining costs | 72,000 | ||
Total cost to make 13,400 engines | $ | 584,600 | |
*The equipment has a book value of $102,000 but its market value is zero. Required
Determine the maximum price per unit that Rooney would be willing to pay for the engines.
Determine the maximum price per unit that Rooney would be willing to pay for the engines, if production increased to 18,650 units.
(For all requirements, Round your answers to 2 decimal places.)
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